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How A Sweeping "New York Only" Trade Caused A 19,600 Share Flash Smash In IBM, And Sent The DJIA Surging

Tyler Durden's picture





 

Courtesy of today's flash smash in IBM stock, which briefly sent IBM stock surging by 3% on what appears to have been a rogue trade, but may have been more, we now have some further clues into the massive market lifting buy orders that appear out of leftfield at strategic times, typically just before Sputnik moments. Bloomberg explains the melt up in the stock, that coincided with the inexplicable 80 point DJIA rally on no news, that moved the market from its lows, to green (in ES) for the day. "IBM, which makes up 10 percent of the share-price weighted Dow average, jumped to $164.35 on an order for 200 shares on the New York Stock Exchange at 3:18:15 p.m. New York time, according to data compiled by Bloomberg. The stock traded at $160.89 during the same second, followed by five trades for a combined volume of 19,600 shares at between $163.22 and $164.35, or as much as 2.2 percent higher. IBM retreated to $160.78 following those trades." But by then it was too late: the buying spree, of which IBM had been part of, had offset a momentum algo that for some inexplicable required a stunning 500 ES contracts per second for the last 15 minutes of trading - a truly whopping number, and indicative of someone with virtually unlimited pockets doing the buying. Furthermore as the chart below shows, the IBM trade happened just as the buying program went berserk and sent the TICK to the day's high at 1352.

Here's what really happened: a "lift all" algo went nutes at precisely 15:18:15

And once again, it is the NYSE and those damn LRPs that are to blame:

“It looks like a rogue print,” Shea said. “My guess is
that this is an electronic order that was sent to the floor in
New York, tagged ‘New York only’ erroneously, restricting it
from being sent to other exchanges and thereby sweeping the book
in New York.”

Sure enough, our good old friends from the NYSE, who still owe us that DMM participant schedule, had nothing to say:

NYSE spokesman Ray Pellecchia and IBM spokesman Mike Fay
declined to comment when contacted by phone.

We'll provide you what they would say in the absence of a conflict: the complete lack of liquidity almost caused today's 3pm Fed-Citadel ramp up to crash and burn. Almost. Next time it just may...

 


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Tue, 01/25/2011 - 23:20 | Link to Comment Hephasteus
Hephasteus's picture

I could never care enough to do what I had to do
And now that I am scared enough, it all comes back to you
Communication's rarely open for messages to get through
I would speak, I'd be outspoken if I could think of anything new

Where would I be without my radio?
Where would I be without birth control?
Where would I be without fair-weather friends?
Where would I be without IBM?

You tell me what I should need, advice is your specialty
But could I ever need enough for you to set me free?
I'm afraid to make decisions, that's where you come in
In the case of chance collisions, I look at you as my friend

Where would I be without my PC?
Where would I be without MTV?
Where would I be without CNN?
Where would I be without IBM?

Where would I be without all my toys?
Where would I be without sampled noise?
Where would I be without seeing you again?
Where would I be without IBM?

Tue, 01/25/2011 - 23:21 | Link to Comment suteibu
suteibu's picture

Can't have a down market on the day of Obama's prom.

Tue, 01/25/2011 - 23:23 | Link to Comment bogey4
bogey4's picture

Where are the comments for the Faber interview?  I click on the "comment" link and there's no comments.

Tue, 01/25/2011 - 23:28 | Link to Comment El Hosel
El Hosel's picture

..... At one point he asked the Bloomberg interviewers what type of acid they were on, that was the comment that stuck with me.

Tue, 01/25/2011 - 23:29 | Link to Comment ebworthen
ebworthen's picture

Same problem here...

Tue, 01/25/2011 - 23:42 | Link to Comment ebworthen
ebworthen's picture

bogey4 - The comments section for the Faber interview will work with Firefox but not with IE8.

Tue, 01/25/2011 - 23:26 | Link to Comment El Hosel
El Hosel's picture

   Intersting...

    "squeeky Bull" Laszlo Birinyi  ( whatever ) was squeeking away at the same time on CNBS, when the melt up occured...pretty sure he said SPY 2500, hard to be sure as the volume was down.

 

 

Tue, 01/25/2011 - 23:41 | Link to Comment Misean
Misean's picture

Volume's been down for a while...

Tue, 01/25/2011 - 23:30 | Link to Comment ebworthen
ebworthen's picture

IBM has been running a lot of commercials lately.

Be sure and take notice of their "word cloud" filtration technology that "pulls meaning" out of spoken and written language (a la Jeopardy contestant challenge).

Lots of Big Brother potential there.

Hitler and the Nazi's used IBM machines and consultation to track down Jew's and other social and political enemies - registered gun owners were one of their first targets.

Wed, 01/26/2011 - 00:12 | Link to Comment Hephasteus
Hephasteus's picture

Cloud ain't happening. Not by random chance, not by influence, not by force.

Wed, 01/26/2011 - 09:45 | Link to Comment Almost Solvent
Almost Solvent's picture

Three issues with the cloud:

(1) Security (not sure I would trust someone else)

(2) Storage (everyone uploaded everything on their hard drives and added going forward)

(3) Speed (all that uploading and downloading ain't gonna speed things up)

Tue, 01/25/2011 - 23:26 | Link to Comment plocequ1
plocequ1's picture

Now what?

Tue, 01/25/2011 - 23:28 | Link to Comment Caviar Emptor
Caviar Emptor's picture

The IBM thingy happened so we can get to 12K this week (or tomorrow). We can't let a little thing like Middle East insurgency, a UK double-dip recession and flaming inflation get in the way of our manifest destiny: DOW to the Moon, to the Stars and to boldly go where no banksters have ever gone before

Wed, 01/26/2011 - 09:32 | Link to Comment blindfaith
blindfaith's picture

The whole sham is to make the retail investor drool and get back into the market so the FED can quietly slip out the back door and leave another straw house to fall down on the middle class and what is left of the ghost called 401K.

Tue, 01/25/2011 - 23:34 | Link to Comment bob_dabolina
bob_dabolina's picture

Damn Waddell and Reed.

Tue, 01/25/2011 - 23:37 | Link to Comment bob_dabolina
bob_dabolina's picture

What is a "New York Only" order. That is a new one to me.

Wed, 01/26/2011 - 10:22 | Link to Comment Don Birnam
Don Birnam's picture

Origin: 

33 Liberty Street, New York, NY.

Tue, 01/25/2011 - 23:45 | Link to Comment Xibalba
Xibalba's picture

A big middle finger

Tue, 01/25/2011 - 23:46 | Link to Comment Misean
Misean's picture

Gives a whole new meaning to "In a New York minute"

Tue, 01/25/2011 - 23:46 | Link to Comment Sophist Economicus
Sophist Economicus's picture

Hey, don't look now, but I think that IBM price chart had an erection

Tue, 01/25/2011 - 23:48 | Link to Comment Oh regional Indian
Oh regional Indian's picture

12,014, anyway they can get to that number. A dream I had a few years ago, number is seared in my brain. 12,014 and then downnnnn, like humpty dumpty.

Till then, flash crashes, smashes and their ilk will abound. Would be really instructive as to what the make up of "traders" on the NYSE are today. As in what percent trades are Algo trades, how many institutional and how many sucker-sheeple-individuals. Enlightened traders like those on ZH are obviously .000000002% and thus don't count.

ORI

http://aadivaahan.wordpress.com/2011/01/21/accidental-lives/

Wed, 01/26/2011 - 00:13 | Link to Comment topcallingtroll
topcallingtroll's picture

Its been a mark twain kinda day around here. To paraphrase the old dude......the common trader is one who thinks he isn't.

Tue, 01/25/2011 - 23:50 | Link to Comment RobotTrader
RobotTrader's picture

Basically, so many hedge fund traders are nervous about the FOMC, there are fat fingers flying everywhere.

Another example is the solar stocks.  The solars were going up when the tape was weak, so everybody and their brother were piling in the early morning after GS's upgrade of FSLR.

Then when the tape v-bottomed and ramped up, those same people suddenly exited the solars en masse and went on to chase the QQQQ screamers like EMC.

Wed, 01/26/2011 - 00:10 | Link to Comment topcallingtroll
topcallingtroll's picture

I think we all like screamers. Thanks for the explanation. I was starting to get paranoid.....again...

Tue, 01/25/2011 - 23:58 | Link to Comment A_MacLaren
A_MacLaren's picture

Nothing like a little market viagra to ensure a rock hard close.

Wed, 01/26/2011 - 00:18 | Link to Comment HungrySeagull
HungrySeagull's picture

We should put Laughing gas into the entire Market Building so that everyone inside will just buy without care to the pain.

Wed, 01/26/2011 - 00:28 | Link to Comment jedimarkus
jedimarkus's picture

I had TICK +1458...

Wed, 01/26/2011 - 00:34 | Link to Comment SAME AS IT EVER WAS
SAME AS IT EVER WAS's picture

Another day on Cheat Street.

Wed, 01/26/2011 - 00:41 | Link to Comment Lady Heather...UNCLE
Lady Heather...UNCLE's picture

It's bloody Waddel and Reeds' fault...

Wed, 01/26/2011 - 01:04 | Link to Comment spekulatn
Wed, 01/26/2011 - 02:45 | Link to Comment Hephasteus
Hephasteus's picture

You all are bunch of bookies!!!!

Wed, 01/26/2011 - 01:08 | Link to Comment Captain Benny
Captain Benny's picture

Most traders now days avoid doing large market orders like this and instead have algorithms dictate the exact timings of when an order should be executed.  They hand off lets say a 20,000 share buy order to their algorithmic engine (or a third party) which then splits it up into lots of little orders that are sent to different markets at different times.  Its becoming rarer that people just toss large orders to one market...  Thats not to say it doesn't happen... its just becoming rarer by the day.

Wed, 01/26/2011 - 09:39 | Link to Comment Tyler Durden
Tyler Durden's picture

It's called VWAP and we have been discussing child order algos for about 2 years on zerohedge.

Wed, 01/26/2011 - 11:35 | Link to Comment MachoMan
MachoMan's picture

Ok...  and so who would do this and why would they do it if they know it should be broken into smaller orders to maximize returns?

Wed, 01/26/2011 - 01:16 | Link to Comment lunaticfringe
lunaticfringe's picture

It will achieve that price soon anyway. Up up and away, in my beautiful balloon. Efficient pomo markets.

In other news, I see the commodities desks punished PM right up to expiration. I tacked some more physical on mid day.

Wed, 01/26/2011 - 02:06 | Link to Comment Threeggg
Threeggg's picture

So instead of a "Flash Crash" we now have to look out for "Flash Pumps" ?

This is all to funny !!

sad really...................................

Get your shit together kids this is going to be a trip to Wally World !

And in regards to the SOTU speech, it was all talk again (not one f%ckin thing material)

All I heard was Spend, Spend - Spend Spend spend !

and

Maybe kinda sorta we will talk about this "debt" thingy hopefully sometime one day in the future...................

anybody else hear anything different ?

Wed, 01/26/2011 - 08:27 | Link to Comment anony
anony's picture

Naw. Watched re-runs of, "The Housewives of Beverly Hills", followed by watching a 5 minute synopsis of what "the Situation", and Snooki, were up to in Jew Nersey.

Wed, 01/26/2011 - 02:12 | Link to Comment DraginDickHedge
DraginDickHedge's picture

Brilliantly satirical, ZH..."Sputnik Moments".  I've just experienced a total life paradigm shift...For years now while watching the markets and this administration act out, I thought I was experiencing Senior Moments but now realize these have actually been Sputnik Moments all along.  Amazing paradigm.

Wed, 01/26/2011 - 02:26 | Link to Comment DJIA36000
DJIA36000's picture

The should add Apple to the dow and just let IBM go to $180.  We get to 36,000 faster that way. 

Wed, 01/26/2011 - 02:35 | Link to Comment Hephasteus
Hephasteus's picture

Apples like 8 percent of the pc market and has market caps up there with microsoft and ibm. Apple is just nonsense.

Wed, 01/26/2011 - 09:40 | Link to Comment Augustus
Augustus's picture

From the last earnings reports, not that AAPL and IBM have about the same revenues, +- a few percent.  Then look at the market caps.  Sure, different sources of the revenues, but it is a bit interesting.

Wed, 01/26/2011 - 04:48 | Link to Comment Padrone
Padrone's picture

Funny, on Monday there was one of those IBM surgess as well; before the market went up.

 

Wed, 01/26/2011 - 10:19 | Link to Comment Whalers
Whalers's picture

I watched it happen.  Don't worry, the true market forces are close to taking over soon.  You can almost feel the change starting.

Wed, 01/26/2011 - 20:00 | Link to Comment trustee
trustee's picture

True Market forces eh? Good luck to you and your account kind sir...You'll need it betting against this market...

Sun, 01/30/2011 - 15:38 | Link to Comment Aerows
Aerows's picture

Mmm.  I love the smell of market manipulation in the morning.

Thu, 03/10/2011 - 21:17 | Link to Comment onlinepandoraje...
onlinepandorajewellery's picture

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